High Risk Payment Processing: How Are Merchants Shut down?
Blog post from Basis Theory
High-risk merchants can be shut down either by card networks for sustained excessive chargebacks or by acquirers and payment service providers (PSPs) based on their own risk assessments, sometimes with little warning. Visa’s Dispute Monitoring Program begins with early warning at 75 disputes and a 0.65% dispute ratio, formally enrolls merchants at 100 disputes and 0.9%, and applies heightened enforcement at 1,000 disputes and 1.8%; merchants generally must remain below thresholds for three consecutive months to exit, while failure to improve after 12 months can lead to disqualification. Mastercard’s Excessive Chargeback Program applies after two months meeting thresholds of 100 chargebacks and a 1.5% ratio, or 300 chargebacks and 3%, and likewise requires three compliant months for removal. During monitoring programs, merchants and acquirers may face remediation requirements, ongoing reporting, fees, and escalating enforcement, with acquirers often passing costs to merchants. A shutdown can stop card-network acceptance entirely or merely require a merchant to find a new acquirer, and PSPs may hold funds for extended periods to cover anticipated refunds and disputes, intensifying cash-flow pressures.
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